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Monday, 04 March 2019

Student-Housing Sector Shifts, Impacting CMBS Loan Performance

The volume of delinquent CMBS loans against student-housing properties has skyrocketed by 144 percent over the 12 months through the end of February. While the universe of CMBS loans against student properties totals only $4.9 billion, the skyrocketing rate points to certain risks that are unique to the sector.

Commercial Real Estate Direct Staff Report

The volume of delinquent CMBS loans against student-housing properties has skyrocketed by 144 percent over the 12 months through the end of February, to $443.2 million from $181.6 million. As a result, the delinquency rate has increased nearly three-fold, to 9.11 percent from 3.92 percent.

What's more, the blame isn't on the legacy universe of loans. Instead, the greater delinquency has been driven solely by loans written since the Great Financial Crisis, the so-called CMBS 2.0 universe.

While on its face, the worsening profile of securitized student-housing loans is astounding, the CMBS universe contains only $4.9 billion of such loans. So, huge moves in the delinquency rate can be the result of one or two collateral properties struggling.

Contrast the volume of student-housing loans in CMBS with the $116.9 billion of loans against retail properties in the same universe. Those have a 4.96 percent delinquency rate. Or the $116 billion of office loans, which have a 3.24 percent rate, and $73.2 billion of hotel loans, with a 1.55 percent rate.

Nonetheless, the skyrocketing student-housing delinquency rate points to risks unique to the sector.

Student housing has challenges that are different from those that might face the regular multifamily market, explained Dave Borsos, vice president of capital markets at the National Multifamily Housing Council.

How a property is marketed before the start of a school year could affect its revenue stream until the following summer. In contrast, units at typical apartment properties are leased throughout the year, so a vacancy in July could be filled in August or September. At a student-housing property, if a unit is vacant in September at the beginning of the school year, it could very well remain vacant until the following September.

In addition, properties that sit closer to the campuses they serve typically perform better than those further away, said Jennifer Cassidy, executive vice president and co-chief operating officer of Campus Advantage, an Austin, Texas, student-housing investment and management firm. That, however, is a relatively new phenomenon.

Before 2010, large student-housing developments often were constructed two to three miles from the campuses they served - where they had space to build. They were well amenitized, resulting in students flocking to them. Newer properties, explained Scott Clifton, a director specializing in student housing at HFF's...





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Data Digest

 

CMBS DELINQUENCY VOLUME

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CMBS SPECIAL SERVICING VOLUME

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Top Bookrunners Domestic, Private-Label CMBS - 2017
Investment Bank #Deals Vol$mln MktShr%
Goldman Sachs 17.59 11,819.34 13.68
JPMorgan Securities 14.52 10,968.11 12.70
Citigroup 12.04 10,012.71 11.59
Wells Fargo Securities 14.02 9,936.06 11.50
Deutsche Bank 12.55 9,879.74 11.44

 

RCA CPPI

 

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CMBS 2.0 Spreads

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Top CMBS Loan Contributors - 2017
Lender #Loans Vol$mln MktShr%
Goldman Sachs 146.89 11,719.34 13.63
JPMorgan Chase Bank 117.68 10,114.14 11.76
Deutsche Bank 198.48 9,689.97 11.27
Morgan Stanley 166.18 8,539.78 9.93
Citigroup 199.05 8,088.24 9.41

 

 

 

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